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The End is Nigh! Or is it the Beginning?

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The End is Nigh! Or is it the Beginning?

By - Monday 18 October 2010

The past ten days or so has seen the British press publishing more doom than normal for the property industry. The Halifax have piped up claiming house prices have dived by a further 3.6%, the government are allegedly going to flog their property off to the private sector in what will likely be a Gordon "Gold Sale" Brown style car boot sale, and one agent appears to have completely lost his marbles by suggesting that property market infidels should be suitably disposed of by adorning his shop front with "Kill All Negative People".

The latter is perhaps somewhat extreme to say the least, and whilst I won't agree with the suggestion directly, anyone in the property business or trying to sell a house probably feels the same way.

Sadly, the press just can't find anything positive to write about and, on the rare occasion they do, they get it wrong. An article here that eludes to telling us where the best place might be to buy in a poorly performing market just gives us a list of property of which most are priced the wrong side of GBP 250K, finished off with a list of the top 10 least resilient areas (I bet people living there are very pleased!).

The facts in all of this get blown way out of proportion and applied in the wrong way by the "property journalists" in a bid to call them news.

For example: the Halifax stating that "An increase in the supply of property and a drop in demand fuelled by uncertainty about the economy pushed prices down 3.6 per cent, the biggest monthly fall since figures were first compiled in 1983." is one thing. The Telegraph, however, interpret this by running with the headline "House prices have suffered their biggest drop on record, with more than �6,000 wiped of the value of the average property last month." Shocking enough if your house is worth 300K, heart attack inducing if it's only worth 100K.

The reality is that yes, in many areas house prices are still falling, and they will continue to do so for a while as more government cuts are announced and whilst the mortgage and banking system gets itself back into some kind of order. Blazing headlines predicting the end of the housing market and forcing it down yet further are really not helping anyone at all, owners or buyers.

In contrast, statistics of late are now showing that London IS improving, not just on house prices but even more so in the commercial sector. What this tells us only requires a little thought by the journalists of the world, which unfortunately they appear to be unable to tap into.

London, being the capital does have a slight advantage: it's a busy place, with a lot going on. Given that the Olympic Games is rolling into town soon, it's no real wonder there is expanding demand in the area.

As a result of this, vast sums are being spent on infrastructure; roads, rail you name it, all in preparation for the event. For the shortsighted journo hack this might not mean much. In the long term though (both past and present), London has long been due an overhaul.

Subsequently, because all of this is going on, Johnny Foreigner has spotted something the UK press seem to be blind to. Opportunity. Enormous sums of investment are flooding in from around the world, specifically to buy up property in the UK capital. Nowhere else (to speak of) - just London.

What are they buying?

The largest increase in asset buying has been commercial property so far, but house prices are on the rise too. Commercial was set to start rising first because of the business impact of the Olympics anyway, and whilst house prices might be secondary at the moment, the general influx of hard foreign cash into the area will sustain the rises long after the Olympic bandwagon has trundled on its merry way.

The pessimists out there will still bring up the point about Greece, "they had an Olympics and they are begging cap in hand for bail-out money". This is true, but look at the fundamental differences here: Greece is a lot smaller, and aside from its shipping industry (of which most is run through Cyprus for taxation reasons anyway) it simply does not have the multicultural business appeal that London does, or come to that, the ability to cope with it even if it did.

This is not to say that London is about to be swamped with corner shops and vuvuzela warehouses (although there might be one or two) because it's high level commercial that is being invested into. Shopping centers, hotels and offices, all in time to take as much advantage as possible of the great re-vamp, and ensure that the smart money is in as early as possible.

Of course, the average investor can ill afford to nip down to London and throw a few million pounds at a shopping complex or hotel; the money is coming in from Real Estate Investment Trusts, Pension Funds and so on.

There is money to be made here, no question. It's just how you go about it. Buying an already overpriced two up two down and expecting to be the next Buy to Let billionaire is not the answer. Property funds, REITS and hotel room investments is where the smart money is going. Investment into property without the nightmare of personal negative equity, or a toxic asset round your neck.

I have commented before extensively on how and when this recession will end, and the end is nigh, the end starts in London.

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.


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